Exam Practice Problems - Save Lee Miller - 0 X Comments Search Share Review View Help Wrap lest Merge & Center. LL Com Auto Serve G 9 .8. File Home insert Dres Page Layout Formulas Data Times New Roma 11 AA = For Painter B I . . . === Chipboard Font * Total BC D 1 Problem 1 $. % Conditional Format Formatting Table Gal Styles u t Dute Formal - - Ideas Sort Fad Futer Select Cles Alat Eating I CHLI K L M N O P R S T U V W 3 Elimination of a Business Segmeat 5 Spilker Linens Store has three departments Bath Kitchen and Beding The most recent 6 income statement, showing the total operating profil and departmental results is shown below. Total Bath Kitchen Bedilir 9 Sales $2,100,000 $1,000,000 $600,000 $500,000 10 Cost of goods sold (1.260.000) (500,000) (400.000) (360,000) 11 Gross profit 340.000 500.000 200.000 140,000 12 Direct expenses (420,000) (200,000) (100,000) (120,000) 13 Allocated experies (350.000) (100.000) (75000) (175,000) 14 Net income (loss) 20.000 200.000 25.000 (155.000) 15 16 Based on this income statement, management is planning on eliminating the Bedding department, as it 17 is generating a net loss. If the Bedding department is eliminated the Kitchen department will expand 10 to fill the space, but sales will not change in total, nor will direct expenses. None of Bedding's allocated 19 expenses will be avoided, but they will be reallocated to Bath and Kitchen Bath will be allocated 20 $100,000 additional expenses, and Kitchen will be allocated $75,000 additional expenses 21 22 Required 23 Prepare a new income statement for Spalker Linens Store, showing the results if the Bedding Department 24 is eliminated and indicate whether eliminating the department is advisable. Start >> Problem 1 Problem 2 Problem 3 Problem 4 Problem 5 Display Settings - Type here to search BO